Zimbabwe's Currency Devaluation Worries Bankers - 2003-08-07

Zimbabwe's currency went into free fall Thursday, losing one third of its value since Tuesday, and currently changing hands at one U.S. dollar to about 6,000 Zimbabwe dollars.

Bankers say the latest fall in the Zimbabwe dollar is largely caused by private sector demand for foreign currency to import fuel.

Until recently, the government was the only legal importer of fuel, but it has no foreign currency reserves, and has relaxed regulations to allow privately owned companies and individuals to bring fuel into the country.

Gasoline and diesel fuel are now available to those who can pay in foreign currency up to 60 cents a liter, about five times more than what it cost when it was widely available in local money.

People can no longer buy fuel from gas stations, and instead, have to go to a variety of new outlets, sometimes in the back yards of private homes.

To ease the acute shortage of bank notes, the government said Thursday it will start issuing travelers checks in large denominations. Starting Friday, the checks will be accepted as legal tender in Zimbabwe, but will not be valid abroad.

Meanwhile, the country's economic crisis continues to deepen. In the last five days, tobacco growers have twice canceled sales of their crop at the annual auctions, because they are paid at the official rate of 880 Zimbabwe dollars to one U.S. dollar. Even though tobacco crops have been dramatically reduced, earnings from tobacco exports contribute a large share to Zimbabwe's foreign currency reserves.